The Trump administration has drafted preliminary economic growth forecasts in its federal budget planning that rely on assumptions that are far rosier than projections made by independent agencies and most private forecasters, according to several people familiar with the discussions.
The forecasts are being revised, these people said, following an internal debate. One concern is that pressing staff economists to produce aggressive forecasts might undercut the credibility of top appointees forced to later defend those numbers.
The deliberations show the challenge the administration faces as it tries to reconcile the competing goals of cutting taxes, boosting military and infrastructure spending, preserving Medicare and Social Security programs and keeping budget deficits from soaring.
The forecasts, which were initiated before President Donald Trump took office, project gross domestic product—a broad measure of national output of goods and services—growing between 3% and 3.5% a year over the coming decade, with inflation-adjusted annual growth ultimately settling at around 3.2% during the later years of the 10-year forecast.
The economy has grown around 2% on average over the past decade. Many economists believe sustained growth at more than 3% will be difficult to achieve without a sharp rebound in productivity growth and a reversal in the slowing expansion of the U.S. labor force, developments few are projecting. Worker productivity growth has slowed to 0.7% a year since 2010, a sharp slowdown from rates exceeding 3% in the late 1990s and early 2000s.William Mauldin and Devlin Barrett report at The Wall Street Journal:
The Trump administration is considering changing the way it calculates U.S. trade deficits, a shift that would make the country’s trade gap appear larger than it had in past years, according to people involved in the discussions.
The leading idea under consideration would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged, these people told The Wall Street Journal.
Economists say that approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out, known as re-exports.
Data on trade balances and surpluses, widely followed by Congress, are at the center of a political battle over whether existing trade agreements should be retained, renegotiated or tossed out altogether.
A larger trade deficit would give the Trump administration ammunition in arguing that trade deals need to be renegotiated, and might help boost political support for imposing tariffs.
Ana Swanson explains at The Washington Post:The media has not reported that the National Debt in my first month went down by $12 billion vs a $200 billion increase in Obama first mo.— Donald J. Trump (@realDonaldTrump) February 25, 2017
The dollar figures, which come from the Treasury Department, are accurate, but they deserve a lot more context.
For one, Trump is citing such a narrow window of time that the statistics he’s pointing to don’t mean very much. The level of debt fluctuates day to day and week to week, depending on seasonal changes in growth and when the government makes payments, collects tax revenue, issues new debt and other debt matures — making the data very susceptible to cherry-picking.
Using the same logic, for example, you could claim that after four days in office Trump increased outstanding public debt by more than $10 billion, and that Obama had reduced it by $6 billion.
On Thursday, the public debt outstanding was $19.9 trillion — or, to be more exact, $19,913,903,120,188.10. And while that is less than it was on Inauguration Day, it's $29.2 billion more than it was on Feb. 8. All that goes to say you can't pay attention to infinitesimal movements in the debt week-to-week.
It’s impossible to know whether Trump’s election has really had time to filter through to concretely affect the economy. Congress has not passed any of his policies yet. The stock market has certainly continued to boom, but it was already rising before the election.